On January 1 you sold short one round lot that is 100 shares

On January 1, you sold short one round lot (that is, 100 shares) of Lowe\'s stock at $20.50 per share. On March 1, a dividend of $1.80 per share was paid. On April 1, you covered the short sale by buying the stock at a price of $14.50 per share. You paid 40 cents per share in commissions for each transaction.

a. What is the proceeds from the short sale (net of commission)?

Proceeds from the short sale            $

b. What is the dividend payment?

Dividend payment            $

c. What is the total cost, including commission, if you have to cover the short sale by buying the stock at a price of $14.50 per share?

Total cost including commission            $

d. What is the net gain from your transaction?

Net gain            $

Solution

1. Proceeds from short sale=(20.5-0.4)*100=2010

2. Dividend payment=1.8*100=180

3. Total cost=(14.5+0.4)*100=1490

4. Net gain=2010-180-1490=340